nep-eec New Economics Papers
on European Economics
Issue of 2005‒12‒20
23 papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Labour Force Participation of the Elderly in Europe: The Importance of Being Healthy By Adriaan Kalwij; Frederic Vermeulen
  2. Gender-Job Satisfaction Differences across Europe: An Indicator for Labor Market Modernization By Lutz Kaiser
  3. The Principle of Proportionality: Separating the Impact of Dual Class Shares, Pyramids and Cross-ownership on Firm Value Across Legal Regimes in Western Europe By Morten Bennedsen; Kasper Nielsen
  4. Social Policies and Employment of Married Women in Europe By Daniela Del Boca; Silvia Pasqua
  5. On the Community Patent By Hoernig, Steffen
  6. The Impact of the Institutions on Regional Unemployment Disparities By Floro Ernesto Caroleo – Gianluigi Coppola
  7. Is Monetary Policy in the Eurozone less Effective than in the US? By Paul De Grauwe; Cláudia Costa Storti
  8. Provincial Interests and Political Integration: Voting in the French Maastricht Referendum By Andrew Austin
  9. Entry and Exit in a Liberalised Market. By Maria J. Gil-Molto; Claudio A. Piga
  10. European Perspectives on Export Performance Determinants: An Exploratory Study By Lages, Luis Filipe; Lages, Carmen; Lages, Cristiana Raquel
  11. Agency Costs and Investment Behavior By Dorofeenko, Viktor; Lee, Gabriel S.; Salyer, Kevin D.
  12. A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe By Dalia Marin
  13. Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland By Andzelika Lorentowicz; Dalia Marin; Alexander Raubold
  14. Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine By J. David Brown; John Earle; Almos Telegdy
  15. Demand and Technology Determinants of Structural Change and Tertiarisation: An Input-Output Structural Decomposition Analysis for four OECD Countries By Maria Savona; André Lorentz
  16. Do benefit hikes damage job finding? Evidence from Swedish unemployment insurance reforms By Bennmarker, Helge; Carling, Kenneth; Holmlund, Bertil
  17. Do market failures hamper the perspectives of broadband? By Machiel van Dijk; Bert Minne; Machiel Mulder; Joost Poort; Henry van der Wiel
  18. Taxation and the Financial Structure of German Outbound FDI By Jack Mintz; Alfons Weichenrieder
  19. Stability or change in the Swedish Labour Market Regime? By Olofsson, Jonas
  20. Wage and Employment Effects of Immigration to Germany: Evidence from a Skill Group Approach By Holger Bonin
  21. Does Social Capital Improve Labour Productivity in Small and Medium Enterprises? By Fabio Sabatini
  22. Technology Shocks and UK Business Cycles By Hashmat Khan; John Tsoukalas

  1. By: Adriaan Kalwij (Utrecht University and IZA Bonn); Frederic Vermeulen (Tilburg University, Netspar, CentER and IZA Bonn)
    Abstract: In this paper we study labour force participation behaviour of individuals aged 50-64 in 11 European countries. The data are drawn from the new Survey of Health, Ageing and Retirement in Europe (SHARE). The empirical analysis shows that health is multidimensional, in the sense that different health indicators have their own significant impact on individuals’ participation decisions. Health effects differ markedly between countries. A counterfactual exercise shows that improved health conditions may yield over 10 percentage points higher participation rates for men in countries like Austria, Germany and Spain, and for females in the Netherlands and Sweden. Moreover, we show that the declining health condition with age accounts considerably for the decline in participation rates with age.
    Keywords: SHARE, labour force participation, health, retirement
    JEL: I10 J22 J26
    Date: 2005–12
  2. By: Lutz Kaiser (IZA Bonn, DIW Berlin and EPAG)
    Abstract: In 14 member states of the European Union, women’s relative to men’s levels of job satisfaction are compared by using data of the European Household Community Panel. The countries under consideration can be assigned to three different groups. Denmark, Finland and the Netherlands do not show significant gender-job satisfaction differences. In contrast, in Portugal men are more satisfied with their jobs than women. However, in the vast majority of the investigated countries female workers show a significantly higher level of job satisfaction. As the majority of women are disadvantaged compared to men in the labor market, the findings clearly demonstrate a gender-job satisfaction paradox in these countries. From this point of view, only Denmark, Finland and the Netherlands display gender-job satisfaction equality. The results suggest that objective (socio-economic and institutional) determinants of labor market statuses and subjective (assessed and evaluated) perspectives are mutually complementary. The more restrictive the labor market access and process is for women, the more likely a gender-job satisfaction paradox is to emerge in any country. With regard to the process of labor market modernization, the results support the hypotheses that equal opportunities for women and men like in Scandinavian countries and also partially in the Netherlands implicate that the gender-job satisfaction paradox does not appear anymore due to a fading-out over past decades.
    Keywords: cross-national comparison, gender-job satisfaction paradox, labor supply, labor market modernization
    JEL: J28
    Date: 2005–12
  3. By: Morten Bennedsen (Copenhagen Business School); Kasper Nielsen (University of Copenhagen)
    Abstract: Recent policy initiatives within the harmonization of European company laws have promoted a so-called “principle of proportionality” through proposals that regulate mechanisms opposing a proportional distribution of ownership and control. We scrutinize the foundation for these initiatives by analyzing the use of instruments to separate ownership from control across legal regimes in a sample of over 4,000 publicly traded firms from 14 Western European countries. First, we confirm the negative impact on firm value from disproportional ownership structures previously established in a sample of Asian firms by Claessens et al. (2002). Second, we show that dual class shares have a larger and more significant negative effect on firm value than pyramids and cross holdings. Third, we find that the impact of disproportionality and the underlying instruments is inversely related to the level of investor protection. Thus, dual class shares and pyramids substitute legal protection in countries with inadequate investor protection. Fourth, we find no evidence of a significant effect of disproportionality instruments on earnings performance. Finally, we discuss policy implications of these findings in relationship to the process of harmonization of the European capital markets.
    Keywords: ownership structure; dual class shares; pyramids; EU company laws
    JEL: G30 G32 G34 G38
    Date: 2005–08
  4. By: Daniela Del Boca; Silvia Pasqua
    Abstract: The analysis of the temporal and cross-country patterns of women’s labour market participation and fertility shows how several factors affect the compatibility between childrearing and work (labour market characteristics, social services, and family wealth). The most significant factors which facilitate reconciliation of childrearing and work are the opportunities for part-time arrangements, the availability of childcare and parental leave options. The combination of these options seems to allow different solutions for combining work with having children. Empirical evidence and comparative results show that it is more difficult to combine work and having children in Southern Europe than in the rest of Europe.
    Keywords: labor, market, participation, fertility
    JEL: J2 C3 D1
    Date: 2005–12
  5. By: Hoernig, Steffen
    Abstract: The European Union will be introducing a Europe-wide patent, the so-called Community Patent. Its aim is to foster innovative activity, but strategic effects between firms competing in R&D have not been considered in the official discourse. We show that, even if these are taken into account, the Community Patent will increase innovative activity and welfare. On the other hand, if the decision of participating in R&D is considered, then this increased R&D will be concentrated into fewer firms. Furthermore, we show that existing asymmetries between countries and firms are bound to increase.
    Keywords: Community patent, R&D race, Participation in R&D
    JEL: L52 O34
    Date: 2005
  6. By: Floro Ernesto Caroleo – Gianluigi Coppola (CELPE-DISES, Università degli Studi di Salerno)
    Abstract: The main aim of this paper is to study European regional disparities in unemployment, considering regional productive structures and some regional institutional variables. It is widely known that one most important stylized facts concerning the EU consists in regional disparities among regions. Such differences relate to both income per capita and the labour market, the latter generally measured in terms of unemployment rates. In a recent paper (Amendola, Caroleo Coppola, 2004) we have analyzed the economic structure of the EU’s regions using proxies for the productive structure and the labour market. In this paper we estimate a panel data model where the dependent variable is the regional unemployment rate and the independent variables relate to the productive structure and some regional institutional aspects. The results confirm that institutional variables, such as the centralization of wage bargaining, the decentralization of public expenditure and the level of bureaucracy, have important impactson unemployment rates.
    Keywords: Unemployment, Regional Disparities, Institutions, Multivariate Analysis, Panel data
    JEL: R23 C23 H70
    Date: 2005–10
  7. By: Paul De Grauwe; Cláudia Costa Storti
    Abstract: There is a wide consensus that the existence of structural rigidities in the Eurozone reduces the effectiveness of the ECB’s monetary policies. In order to test this “ECB-handicap” hypothesis, we perform a meta-analysis of the effects of monetary policies in the US and the Eurozone countries. This consists in collecting the estimated transmission coefficients obtained from published econometric studies. Meta-analysis then allows us to control for a number of factors that can affect these estimated coefficients. We conclude that there is no evidence for the hypothesis that the ECB is handicapped in using monetary policies for the purpose of stabilizing output compared to the US.
    JEL: E50 E52 E58
    Date: 2005
  8. By: Andrew Austin
    Abstract: In September 1992 French voters in a national referendum approved the Maastrict Treaty, which instituted several provisions for closer European integration including creation of the Eurozone. This paper analyzes political and economic forces that affected French voters, and the links between the progress of European integration and changes in redistributive spending. Conventional wisdom ascribes the persistence of the Common Agricultural Program subsidies to the political power of farmers, although direct evidence of this has been sparse. The statistical analysis here finds that support for European integration is weaker, other things equal, in areas where farmers were most affected by the MacSharry reforms, which reduced some support prices and began the process of `decoupling' agricultural subsidies from production. Results also show previous support for European integration and pro-European politicians are correlated with stronger support for ratification, as are higher incomes and higher proportions of non-natives. The results are consistent with the view that European integration provides voters and taxpayers with a way to limit the influence of interest groups by shifting decisionmaking from a national to a supranational arena.
    Keywords: Referendum, agricultural subsidies, European integration, voting.
    JEL: H23 D72
    Date: 2005–11
  9. By: Maria J. Gil-Molto (Loughborough University Economics Department); Claudio A. Piga (Loughborough University Economics Department)
    Abstract: We analyze the determinants of entry and exit in the European Airline Markets in the post-liberalization period. Unlike previous studies, we find that the presence of charter or seasonal operators and the level of quality provided by the incumbents are relevant to explain entry and exit. Differential traits in the main low cost airlines' entry and exit behavior are also analysed.
    Keywords: Entry, Exit, Airlines, Conditional Logit
    JEL: L11 L93
    Date: 2005–12
  10. By: Lages, Luis Filipe; Lages, Carmen; Lages, Cristiana Raquel
    Abstract: This exploratory study discusses main antecedents of export performance based on the perceptions of European export managers. Cross-national findings reveal that according to managerial perceptions the most important determinants of export performance are product quality, followed in importance by price competitiveness/value for money, service quality and relationship with importers/trust. While some of these determinants have been extensively researched in the literature (product and service quality), there are others in which there is limited empirical research (price competitiveness/value for money and relationship with importers/trust). Also of interest is the existence of specific issues that are not considered by managers as being top determinants, but are the focus of extensive research. Based on these findings the authors suggest several potentially fruitful streams of research.
    Keywords: Qualitative Study; Export Performance; Export Marketing; Cross-National
    Date: 2004
  11. By: Dorofeenko, Viktor (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Lee, Gabriel S. (Department of Real Estate, University of Regensburg and Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Salyer, Kevin D. (Department of Economics, University of California)
    Abstract: How do differences in the credit channel affect investment behavior in the U.S. and the Euro area? To analyze this question, we calibrate an agency cost model of business cycles. We focus on two key components of the lending channel, the default premium associated with bank loans and bankruptcy rates, to identify the differences in the U.S. and European financial sectors. Our results indicate that the differences in financial structures affect quantitatively the cyclical behavior in the two areas: the magnitude of the credit channel effects is amplified by the differences in the financial structures. We further demonstrate that the effects of minor differences in the credit market translate into large, persistent and asymmetric fluctuations in price of capital, bankruptcy rate and risk premium. The effects imply that the Euro Area's supply elasticities for capital are less elastic than the U.S.
    Keywords: Agency costs, Credit channel, Investment behavior, E.U. Area
    JEL: E4 E5 E2
    Date: 2005–12
  12. By: Dalia Marin (Department of Economics, Ludwigstrasse 28, D-80539 Munich, phone: ++4989/2180-2446, fax: ++4989/2180-6227.
    Abstract: Europe is reorganizing its international value chain. I document these changes in Europe’s international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intrafirm trade between Austria or Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labor in Europe. I find among other things that falling trade costs and reduced levels of corruption as well as improvements in the contracting environment in Eastern Europe are affecting the level of intrafirm imports from that region. These factors also favor outsourcing over offshoring. In contrast, low organizational costs of hierarchies and large costs of holdup (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) favor offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice.
    Keywords: the empirics of global sourcing, intrafirm trade, contract enforcement, comparative advantage in Eastern Europe, empirical test of the theory of the firm
    JEL: D23 D51 F11 L14 O11
    Date: 2005–09
  13. By: Andzelika Lorentowicz; Dalia Marin; Alexander Raubold
    Abstract: Feenstra and Hanson (1997) have argued in the context of the North American Free Trade Agreement that US outsourcing to Mexico leads to an increase in the skill premium in both the US and Mexico. In this paper we show on the example of Austria and Poland that with the new international division of labour emerging in Europe Austria, the high income country, is specializing in the low skill intensive part of the value chain and Poland, the low income country, is specializing in the high skill part. As a result, skilled workers in Austria are losing from outsourcing, while gaining in Poland. In Austria, relative wages for human capital declined by 2 percent during 1995-2002 and increased by 41 percent during 1994-2002 in Poland. In both countries outsourcing contributes roughly 35 percent to these changes in the relative wages for skilled workers. Furthermore, we show that Austria's R&D policy has contributed to an increase in the skill premium there.
    JEL: F21 F23 J31 P45
    Date: 2005
  14. By: J. David Brown; John Earle; Almos Telegdy
    Abstract: We analyze the effects of privatization on firm-level wages and employment in four transition economies. Contrary to workers' fears, our fixed effect and random trend estimates imply little effect of domestic privatization, except for a slight negative effect in Russia, and they provide some evidence of positive foreign effects on both wages and employment in all four countries. The negligible employment impact of domestic privatization results from effects on efficiency and scale that are large, positive, but offsetting in Hungary and Romania, and from small effects of both types in Russia and Ukraine. The positive employment and wage bill consequences of foreign ownership result from a substantial scale-expansion effect that dominates the efficiency effect.
    Keywords: privatization, employment, wages, foreign ownership, Hungary, Romania, Russia, Ukraine
    JEL: D21 G34 J23 J31 L33 P3
    Date: 2005
  15. By: Maria Savona; André Lorentz
    Abstract: The paper provides fresh empirical evidence on the relative role of changes in final and intermediate demand as affecting the changes in the sectoral structure of advanced economies. These latter have led, over the last three decades, to the massive growth of service sectors. The paper draws upon the recently released OECD Input-Output (I-O) tables. The empirical analysis is based on an I-O Structural Decomposition Analysis carried out on 13 manufacturing and service sectors, from the end of 1960s to the end of 1990s. Although heterogeneous sectoral patterns emerge, we find that the structural changes leading to the growth of services, particularly KIBS (Knowl-edge Intensive Business Services), are mainly (domestic) demand-led, whereas the role of foreign trade remains marginal even in the last decade. We infer that, even in the case of the most technologically advanced service sectors, (domestic) demand constraints affect the degree of exploitation of technological opportunities and the patterns of growth.
    Keywords: Structural change, Growth of Services, Input–Output Structural Decomposition Analysis
    Date: 2005–12–11
  16. By: Bennmarker, Helge (IFAU - Institute for Labour Market Policy Evaluation); Carling, Kenneth (IFAU - Institute for Labour Market Policy Evaluation); Holmlund, Bertil (Department of Economics, Uppsala University)
    Abstract: In 2001 and 2002, Sweden introduced several unemployment insurance reforms. A major innovation in the first reform was the introduction of a two-tiered benefit structure for some unemployed individuals. This system involved supplementary compensation during the first 20 weeks of unemployment. The 2002 reform retained the two-tiered benefit structure but involved also substantial benefit hikes for spells exceeding 20 weeks. This paper examines how these reforms affected transitions from unemployment to employment. We take advantage of the fact that the reforms had quasi-experimental features where the “treatments” differed considerably among unemployed individuals. We find that the reforms had strikingly different effects on job finding among men and women. The two reforms in conjunction are estimated to have increased the expected duration of unemployment among men but to have decreased the duration of unemployment among women. The overall effect on the duration of unemployment is not statistically different from zero. However, the reforms reduced job finding among males who remained unemployed for more than 20 weeks.
    Keywords: Unemployment duration; unemployment benefits
    JEL: J64 J65
    Date: 2005–11–28
  17. By: Machiel van Dijk; Bert Minne; Machiel Mulder; Joost Poort; Henry van der Wiel
    Abstract: As broadband telecommunication is seen as a source of productivity gains, the European Union and other regions are encouraging the deployment of a secure broadband infrastructure. In the Netherlands, there is some concern whether the supply of broadband capacity will meet the strongly increasing demand. <P> This report analyses the broadband market and asks whether a specific role of government is necessary. <P> The main conclusions are that presently, given current broadband policy, no considerable market failures exist. Firms have adequate incentives to invest in broadband, partly induced by specific regulation of access to the local copper loop. Hence, there is no need for changes in current broadband policy. Market failures in terms of knowledge spillovers are taken care of by other policies. As the broadband markets are very dynamic, unforeseen developments may emerge such as the appearance of new dominant techniques and market players. <P> The best strategy for the government, in particular the competition authority, is to continuously monitor these markets, making timely intervention easier when needed.
    Keywords: telecommunication; telecom; network; network industries; broadband; regulation; market failure
    JEL: D61 D62 L51 O38
    Date: 2005–12
  18. By: Jack Mintz; Alfons Weichenrieder
    Abstract: The paper analyzes the financial structure of outbound FDI during the period 1996-2002 by drawing on up to 54,022 firm-year observations of 13,758 German-owned subsidiaries. We find that the tax rate in the host country has a sizeable and significantly positive effect on leverage for wholly-owned foreign unlike partially-owned foreign companies. Most of the effect comes from increased intra-company borrowing, while third-party debt is not significantly affected by tax differences. While wholly-owned subsidiaries react more sensitively to tax rate differentials, they are less sensitive to macroeconomic influences like interest rates.
    Keywords: foreign direct investment, financial structure, capital structure, taxation
    JEL: F23 H25
    Date: 2005
  19. By: Olofsson, Jonas (Uppsala University)
    Abstract: From the late 1970s to the early 1990s Sweden diverted from the rest of Western Europe. The employment rate was high and unemployment was kept very low. But in the early 1990s unemployment started to rise also in Sweden. <p> In this paper the worsened situation for low educated in general, and youth in particular, are related to two institutional factors: a changed organisation of vocational education in upper secondary schooling and changes in labour market policy, where changes in vocational education is understood as a cause and changes in labour market policy as an effect of rising obstacles for low educated. Of course, there are several other factors that have to be considered in order to get the full picture, but reforms in the upper secondary school system as well as in labour market policy are of great interest as they can be apprehended as parts of broader changes in the traditional Swedish labour market model. Studies of changes in the Swedish model can also be seen as part of a wider research interest concerning the effectiveness of competing institutional models of capitalism. <p> It’s argued that changes in schooling are an important factor behind increasing social marginalisation and income dispersion. The focus is primarily on the ages between 20 and 24. Changes in upper secondary schooling are also valued in connection to the supply of youth measures connected to labour market policy. Since the beginning of the 1990s, there has been a huge increase of participants in programs directed to youth. This is a direct effect of rising unemployment and increasing troubles for those with unfinished upper secondary education. But it’s also possible to trace changes in labour market policy to broader institutional transformations in the Swedish labour market model. These changes will first and foremost be analysed as an expression of stronger segmentation forces.
    Keywords: Swedish Labour Market; low educated; young adults
    JEL: J21 J23 J24 J62
    Date: 2005–12–12
  20. By: Holger Bonin (IZA Bonn)
    Abstract: The paper analyzes the labor market impact of migration by exploiting variation in the labor supply of foreigners across groups of workers with the same level of education but different work experience. Estimates on the basis of German register data for the period 1975-97 do not confirm the hypothesis that penetration of migrants into skill cells has a significant negative effect on the earnings and employment opportunities of native men. The results indicate that a 10 percent rise of the share of immigrants in the workforce would in general reduce wages by less than one percent and not increase unemployment. Though the adverse effects appear stronger for less-qualified and older workers, the evidence altogether sharply contrasts that from a parallel study for the United States indicating a consistent and substantial negative impact of an immigrant labor supply shock on native competitors.
    Keywords: labor market effects of immigration, skill groups, wage elasticity, Germany
    JEL: J15 J31 J42
    Date: 2005–12
  21. By: Fabio Sabatini (University of Rome La Sapienza, Department of Public Economics)
    Abstract: This paper carries out an empirical assessment of the relationship between social capital and labour productivity in small and medium enterprises in Italy. By means of structural equations models, the analysis investigates the effect of different aspects of the multifaceted concept of social capital. While the bonding social capital of strong family ties seems to be irrelevant, the bridging social capital of weak ties connecting friends and acquaintances is proved to exert a significant and positive influence both on labour productivity and on human development.
    Keywords: Labour productivity, Small and medium enterprises, Social capital, Social networks, Structural equations models
    JEL: J24 R11 O15 O18
    Date: 2005–12–11
  22. By: Hashmat Khan (Carleton University); John Tsoukalas (Bank of England)
    Abstract: After a neutral technology shock, hours worked decline in a persistent manner in the UK. This response is robust to a variety of considerations in the recent literature: measures of labour input, level versus differenced hours in the VAR, small and large VARS, long- versus medium- run identification, and neutral versus investment-specific technology shocks. The UK economy, therefore, offers a unique perspective on the response of hours to technology shocks. The large negative correlation between labour productivity and hours is the source of this response. Models with nominal price stickiness, low substitutability between domestic and foreign consumption, and investment-specific shocks appear to be most plausible in interpreting the short-run effects of technology shocks. Quantitatively, however, technology shocks account for under 20% of the business cycle variation in hours and under 30% of business cycle variation in output. These findings suggest that technology shocks may play only a limited role in driving UK business cycles.
    Keywords: Techology shocks, business cycles
    JEL: E24 E32
    Date: 2005–12–12
  23. By: Hultkrantz, Lars (Department of Business, Economics, Statistics and Informatics); Karlström, Urban (VTI); Nilsson, Jan-Eric (VTI)
    Abstract: The Stockholm – Arlanda airport rail link is a public-private build-operate-transfer project (sometimes referred to as PPP), opened for traffic in late 1999. At the time of decision in 1993, the project was seen as a role model for funding rail infrastructure; it infused private money into the sector, with a hope of improving cost efficiency performance; it broke up the train service monopoly of the national railway company; and it opened up the sector for ideas and impulses from a new actor. <p> The paper seeks to identify the costs and benefits of providing a private company with a monopoly franchise over one particular section of the network. It also highlights tradeoffs present in public-private partnerships and in creating facility-based competition within the railroad industry without ex ante regulation of access. Evidence indicates that losses of allocative efficiency, due to that the number of passengers is far below expectations, are substantial. Since available information about construction costs, due to commercial secrecy, is scarce it is not possible to say whether the overall result of this particular PPP project is efficiency enhancing or not. Our best guess is, however, that a radical change in the present pricing strategy may not mean a financial disaster and would boost the prospective of ex post efficiency.
    Keywords: public private partnership; public transport; build-operate-transfer; outsourcing; contracting out
    JEL: H43 H54 L52 L92
    Date: 2005–12–12

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